As reported by America’s Credit Unions, the National Credit Union Administration (NCUA) has submitted a rulemaking to the Office of Information and Regulatory Affairs (OIRA) to confirm that federal law preempts the Illinois Interchange Fee Prohibition Act (IFPA).
Scheduled to take effect July 1, the IFPA would prohibit the collection of interchange fees on the tax and gratuity portions of debit and credit card transactions conducted in Illinois.
The NCUA’s rulemaking, which is expected to be published in the Federal Register shortly, confirms federal preemption for federal credit unions. The action follows ongoing legal challenges led by America’s Credit Unions, the Illinois Credit Union League, American Bankers Association, and Illinois Bankers Association, which argue that the Illinois law unlawfully interferes with federal authority and the national payments system. Earlier this month, the U.S. Court of Appeals for the Seventh Circuit remanded the case to the district court following similar preemption determinations issued by the Office of the Comptroller of the Currency (OCC) in April.
While the IFPA is an Illinois law, credit unions in California and Nevada should be aware that the operational and compliance implications are not necessarily limited to institutions physically located in Illinois. Credit unions whose members conduct debit or credit card transactions in Illinois could still experience downstream impacts involving interchange processing, merchant routing practices, vendor system modifications, card network compliance obligations, settlement operations, and broader operational complexity within the payments ecosystem.
During this year’s America’s Credit Unions Governmental Affairs Conference (GAC), California’s and Nevada’s Credit Unions raised concerns regarding the IFPA directly with NCUA Chair Kyle Hauptman. Specifically, the leagues encouraged the NCUA to formally recognize federal preemption and/or file an amicus brief in support of America’s Credit Unions and the Illinois Credit Union League’s legal challenge.
California’s and Nevada’s Credit Unions will continue monitoring developments related to interchange regulation and payments policy.
Questions may be directed to Lisa Quaranta, Vice President of Regulatory Advocacy.
